House Prices in UK to Rise Further as Supply Falls
Property prices in the UK are set to go up by somewhere in between 4%-6% next year. Halifax have said that affordability issues and the looming rise in interest rates have slowed down the UK property market.
The level of demand for properties has gone up in the last few months, however the amount of homes being put onto the market has stayed at an all-time low. Both property websites and surveyors have noted a lack of homes that are currently up-for-sale, which is forcing prices higher. It is believed that this is creating a vicious circle because potential sellers are delaying their sale in the hope that more houses will then get put on to the market.
Halifax's housing economist, Martin Ellis, has said in his 2016 forecast that this trend is not expected to differ anytime soon.
"As a result, the substantial imbalance between supply and demand is likely to persist, maintaining upward pressure on house prices in 2016."
"On average, UK house prices look expensive compared to incomes but valuations are supported by the low levels of property for sale, low levels of house building, and exceptionally low interest rates."
He did however, go on to state that he was not predicting a fall in growth from its present level. According to Halifax's house price index, the average UK house price is now situated at £205,240- 9.7% up on the previous year.
In 2016, Ellis said that he believes that the national level of growth will slow down to somewhere in the region of 4-6%, which would mean an increase of £12,000 for properties at the top-end of the market. It is believed that London's growth will slow down even more. Since autumn 2014, house price rises in London have already slowed slightly; at that point house price growth was situated at 21%. This year that rate fell to 13%, and Ellis believes that growth will fall to less than 10% at some point in 2016.
He believes that this national slowdown will be driven by the lack of affordable housing; prices have now risen 5.31 times faster than average UK earnings, London saw a new high of 7.96 times wages. This means that even though mortgage interest rates are at an all-time low, people now need to save more for higher deposits before they can take out a mortgage.
"With house prices continuing to increase more quickly than average earnings, it is increasingly difficult to get on the housing ladder," he said. "This ongoing development, combined with the growing prospect of an interest rate rise, should start to put the brakes on house price growth during the course of 2016."
The figures released by Halifax are generated by the number of mortgages that it approves every month. They are then altered to be representative of typical property sales. The bank had initially predicted increases of between 3%-5%, they say that the delay in the rise of interest rates had a big effect on the levels that are being seen in reality.